The former directors of a Dunedin taxi company have been ordered to pay nearly $100,000 in unpaid wages out of their own pockets.

The Employment Relations Authority determined former Southern Taxis directors Ronald and Maureen Grant were personally liable for leaving former employees out of pocket by treating them as contractors.

Mr and Mrs Grant claimed they did not know they were breaching the law when they failed to provide four taxi drivers with the correct employment entitlements, something an ERA member discounted as "wilful blindness".

An earlier ERA determination ordered Southern Taxis Ltd to pay $97,753.05 in minimum wages and holiday pay arrears to four drivers who were effectively found to be employees of the business.

Gary Powell who worked for the company for more than a year, told the Otago Daily Times last month he and his wife were still waiting for the more than $40,000 they were owed, which did not include any interest which the company was also ordered to pay.

"We've won our case as you know, but it just seems to be dragging on and dragging on and it gets keeping put off over and over again, I'm not sure anyone is intending to deal with it," Mr Powell said.

The company previously held Southern District Health Board and Dunedin Airport contracts for taxi services. However, company assets have been sold and Southern Taxis no longer has the ability to pay.

But the ERA ruling means Mr and Mrs Grant will now be held personally liable for the money owed to four taxi drivers.

Labour Inspectorate Regional Manager Jeanie Borsboom said Mr and Ms Grant knew the difference between contractors and employees and this was a clear case of mislabelling.

"They provided the four drivers with vehicles, payslips, deducted PAYE and treated them differently from other contractor drivers employed by the business.

"At the same time, they failed to keep accurate records, pay at least the minimum wage and holiday pay entitlements and made unlawful deductions.

"The Grants could have avoided the cost of defending and appealing legal action taken by the Labour Inspectorate by seeking advice early on about how to treat all of their drivers in accordance with the law,” Ms Borsboom said.

The decision showed employers could not claim "lack of knowledge" in circumstances where they should have turned their minds to potential breachesand that company directors could not hide behind the corporate veil to reduce their liability.

The next steps will be for the ERA to determine whether Southern Taxis Ltd and the Grants are liable for penalties.

"Unfortunately the inspectorate sees evidence of employees being unlawfully treated as contractors across a number of sectors, with examples in labour-on-hire, construction, and with courier, delivery and taxi drivers.

"Unlawful use of contracting is increasingly a focus area for the Inspectorate. Where breaches are identified the Inspectorate will be holding employers to account and seeking penalties for all of the shortcomings in minimum employment standards—including all leave entitlements—regardless of what remuneration the employer has paid under the contract.

"There are just no excuses for employers to get this wrong or, worse, intentionally rort employees of their rights," Ms Borsboom said.

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